AG Ferguson Sues Estate-Planning Company for Misleading Hundreds of Washington Seniors
Attorney General
The
In reality, the ultimate goal was to obtain detailed financial information to sell complex financial products seniors did not understand. The "Lifetime Estate Plan" packages included a referral to an attorney and annual review meetings, under the guise of reviewing the estate plans, where insurance agents, sometimes deceptively posing as investment advisors, attempted to sell annuities and life insurance.
CLA did not adequately disclose that these products could lock up seniors' assets for years and carried hefty penalties for early withdrawal. These products earned CLA millions in commissions at substantial cost to consumers.
Since 2009, CLA has conducted more than 700 "free lunch" seminars, attended by more than 11,000 Washingtonians. In
"CLA's business model is a classic 'trust mill' scheme." Ferguson said. "The company made a profit off deceptively marketing estate planning and financial products to retirement-age
The lawsuit, filed in
The company trained its workshop presenters to set up one-on-one meetings with attendees as soon as possible after the "free lunch" workshops to minimize the amount of time the clients have to think about whether to purchase a "Lifetime Estate Plan" or discuss it with family or an independent advisor.
CLA insurance agents then used annual meetings with consumers who purchased Lifetime Estate Plans to market high-commission insurance products, such as indexed deferred annuities, that use complex formulas that are extremely difficult to understand. These annuities lock up seniors' retirement savings, allowing them to make only nominal withdrawals during the 10-year deferral period without incurring high surrender penalties. Many seniors incurred substantial penalties for early withdrawal of funds they needed for living expenses.
When marketing the annuity products to seniors, in some cases CLA agents did not disclose the consequences of early withdrawal and falsified seniors' annuity applications to ensure insurance companies would approve them. Agents would sometimes have seniors sign blank application forms, then the agent would fill in fraudulent information.
Not only did agents fail to disclose the penalties for early withdrawal, they sometimes convinced seniors to change their investments from one annuity to another annuity in order to earn a second commission. For example, a CLA agent convinced a senior to move all of her retirement savings into annuities, later persuading her to reinvest money from one of the annuities into another. The agent did not disclose to her that she would incur a penalty over
One agent and a defendant in the lawsuit,
CLA agents including Johnson did not adequately disclose the terms of the annuities to clients. Johnson and other agents also provided investment advice to seniors without being registered to do so.
For example, after falsely representing that he was an investment advisor, Johnson convinced a senior to transfer
On one annuity application, Johnson misrepresented a senior's assets as including a second home worth
"CLA claims they give their customers 'peace of mind,'" Ferguson said. "That is not the case for customers we have interviewed -- just the opposite."
Ferguson's lawsuit asks the court to order CLA and Johnson to stop their unlawful conduct. It also asks for consumer restitution and civil penalties for up to
Consumers who wish to file a complaint regarding
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